2021 (11) TMI 674 - AT - Income Tax

Tribunal orders deletion of unjustified tax addition, criticizes lower authorities for lack of examination.

The Tribunal allowed the appeal, ordering the deletion of the addition of Rs. 5,91,00,000. The lower authorities were found to have unjustifiably ... Unexplained cash credit - Addition u/s 68 - HELD THAT:- AO himself recording the financial credentials of the share subscribers from which it can be noted that the said share subscribers were having enough finances in the form of reserves and surpluses to make investment in the assessee company. AO has simply noted that the share subscribers have sent a bundle of papers in his office. However, we fail to understand that without examining those documents how could the AO came to a conclusion that the transactions in question were not genuine. AO has not pointed out in the Assessment Order as to what further enquiries he wanted to make from the directors of the subscribers to insist for their personal presence. AO could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the AO, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO. As detailed in the written submissions of the assessee, the assessee had duly submitted details and evidences to prove the identity and creditworthiness of each of the share subscribers separately - AO, in the impugned Assessment Order has not recorded any peculiar facts of circumstance which would suggest that the assessee had routed his own money through the above stated subscribers. AO has not brought any material or evidence on the file to show that these share applicants were fictitious persons. The another relevant factor on the file is that in response to the notices issued u/ s 33(6) by the earlier AO, the requisite details were furnished by the assessee as well as the share subscribers. After receipt of said details, the concerned AO did not proceed to make further enquiries, which implies that he was satisfied with the evidences and explanations received by him. After the transfer of the case on 05.12.2014 the subsequent AO issued summons on 09.02.2015 to the directors of the assessee companies to produce before him the directors of the subscriber companies on 20.02.2015. In our view, it was otherwise not possible for the directors of the assessee company to produce all the directors of the share subscribers within such a short time period. Summons were sent through post to the share subscribers on 25.02.2015 and 02.03.2015 to appear before him. However, the Assessment Order in question was passed by the AO on 28.03.2015 itself. Under the normal circumstances, in case of the summons sent through post, one month’s time is required to be given for service of summons upon a person and further a reasonable time was required to be given for personal appearance of the summoned persons. It appears that in this case, the AO has just completed an official formality of issuing summons to subscribers without giving any reasonable opportunity and time to the subscribers to appear. Since the assessment was becoming time barred, the AO has passed the impugned Assessment Order in a hurried manner even without pointing out any defect or discrepancy in the evidences and details furnished by the assessee and even without giving reasonable time of appearance to the concerned directors of the share holding companies. Even, we find that the case laws relied upon by the AO in the Assessment Order are also not applicable to the facts and circumstances of the present case as in those cases, the material fact was that the assessee had not furnished the details and evidences before the AO. However, in this case it is not the case of AO that the assessee has not furnished the relevant details and evidences to prove the identity, creditworthiness and genuineness of the transaction. A perusal of the impugned order of the ld. CIT(A) shows that the ld. CIT(A) has not discussed anything about the material facts of the case. He has not pointed out any defect and discrepancy in the evidences and details furnished by the assessee but simply cited the case laws rendered in the case of M/s. Rajmandir Estate Pvt. Ltd. [2016 (5) TMI 801 - CALCUTTA HIGH COURT] and further NRA Iron & Steel Pvt. Ltd. [2019 (3) TMI 323 - SUPREME COURT] even without pointing out as to how these case laws were applicable to the facts and circumstances of this case. The order of the ld. CIT(A) is a non-speaking order. By simply reproducing the contents of the case laws without discussing about their application on the facts of the case, in our view, would not make the order of the ld. CIT(A) justifiable speaking order and hence, the same is not sustainable as per law. - Decided in favour of assessee. Issues Involved:1. Delay in filing the appeal.2. Addition of Rs. 5,91,00,000 as alleged cash credit.3. Examination of identity, creditworthiness, and genuineness of transactions by the CIT(A).Detailed Analysis:1. Delay in Filing the Appeal:The appeal was filed 74 days late. The Supreme Court's suo motu order extended the limitation period due to COVID-19, making the appeal timely. The relevant order extended the limitation period from March 15, 2020, to March 14, 2021, with an additional 90 days from March 15, 2021.2. Addition of Rs. 5,91,00,000 as Alleged Cash Credit:The assessee filed its return of income on September 8, 2012, declaring a total income of Rs. 380. The case was selected for scrutiny, and notices under sections 143(2) and 142(1) were issued. The AO issued notices under section 133(6) to share subscribers, which were complied with. However, the AO did not conduct further inquiries and transferred the case to another AO, who issued summons to the directors of the subscribing companies.The assessee argued that the previous AO was satisfied with the evidence provided, and the subsequent AO's insistence on personal appearances was unreasonable. The assessee provided detailed evidence, including PAN cards, ITR acknowledgments, bank statements, and audited accounts of the share subscribers, proving their identity, creditworthiness, and genuineness of the transactions.The AO's refusal to accept the director's attendance and the insistence on personal appearances of the directors of the subscribing companies were deemed unreasonable. The AO did not point out any discrepancies in the documents submitted. The financial credentials of the share subscribers indicated sufficient reserves and surpluses to make the investments.3. Examination of Identity, Creditworthiness, and Genuineness of Transactions by the CIT(A):The CIT(A) sustained the addition without properly examining the facts. The assessee argued that the CIT(A) failed to point out any defects in the evidence provided. The CIT(A) relied on case laws without discussing their applicability to the case.The Tribunal noted that the AO did not examine the documents submitted by the assessee and the share subscribers. The AO's insistence on personal appearances without pointing out specific discrepancies was unjustified. The CIT(A)'s order was a non-speaking order, failing to discuss the material facts and the relevance of the case laws cited.Conclusion:The Tribunal concluded that the lower authorities unjustifiably sustained the addition of Rs. 5,91,00,000. The assessee had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions. The appeal was allowed, and the addition was ordered to be deleted.